April 29, 2004


Anika Therapeutics Posts Profitable 2004 First Quarter; Reports 81% Revenue Increase to $6.1 Million

WOBURN, Mass.--(BUSINESS WIRE)--April 29, 2004--Anika Therapeutics, Inc. (Nasdaq:ANIK) today reported net earnings for the first quarter ended March 31, 2004 of $7.8 million, or $.69 per diluted share, compared with a net loss of $313,000, or $.03 per diluted share, for the first quarter of 2003. Net earnings from operations increased $1.7 million to $1.2 million, or $.11 per diluted share, for the first quarter compared to a net loss from operations of $509,000, or $.05 per diluted share, for the first quarter of 2003. Included in net earnings for the first quarter 2004 is a one-time tax benefit of $7.0 million, or $.62 per diluted share.

Total revenue for the first quarter increased 81% to $6.1 million from $3.4 million in the comparable period last year. Product revenue of $5.6 million for the first quarter grew 65% compared to $3.4 million in the same period last year. Product revenue included sales of OrthoVisc(R) to Ortho Biotech Products, L.P., the company's new U.S. distributor, and royalty payments tied to U.S. OrthoVisc end-user sales. Licensing and milestone revenue during the quarter included $550,000 attributable to the amortization of previously disclosed upfront and milestone payments received in connection with the licensing and supply agreement with Ortho Biotech.

"OrthoVisc sales continued to experience significant momentum in international markets, with Turkey and Canada showing the strongest growth this quarter," said Charles H. Sherwood, Ph.D., president and chief executive officer. "In addition to new sales to our distributor in Greece, our launch in Germany, Europe's largest market, is gaining momentum and our distributor in that country is doing a good job building market share.

"In the U.S., we marked a major milestone with the launch of OrthoVisc by Johnson & Johnson's Ortho Biotech unit at the annual meeting of the American Academy of Orthopaedic Surgeons held in early March. Their U.S. sales force is energized and, while it clearly is too early to assess the success of the launch, we are extremely enthusiastic about the reception the product has received thus far and the marketing efforts our new distribution partner is putting behind the product," Sherwood said.

Sales of the company's ophthalmic products, which constituted 43% of product sales for the quarter, grew approximately 20% compared to the first quarter of 2003. Sales of Hyvisc(R), the company's product for equine osteoarthritis, were up 6% for the quarter and contributed 16% of product sales for the period.

Gross margin on product revenue for the 2004 first quarter was 51% compared with 42% for the same period last year. The improvement in gross margin reflects the revenue mix and manufacturing efficiency gains achieved throughout 2003.

Total operating expenses for the first quarter 2004 increased 15% from the first quarter 2003, reflecting slightly higher clinical development costs and general and administrative expenses. The company noted that research and development costs for the current year are expected to continue to exceed those for corresponding periods in 2003 as the company adds additional resources to its research and development programs and advances several product candidates through clinical studies.

"We have treated our first patient in a pilot study to evaluate INCERT(R). our product for preventing post-surgical adhesions, and we are finalizing the protocol and preparing to start a pivotal study for our cosmetic tissue augmentation (CTA) product candidate," said Sherwood. "The pilot study for INCERT is being conducted at two centers in the U.K. and will encompass approximately 45 patients. For CTA, we will conduct a pivotal study in the U.S. and anticipate beginning patient treatments during the second quarter." Sherwood added that the company is actively pursuing discussions with potential partners for its CTA program.

The company has determined that it will likely utilize all of its net operating loss and credit carry-forwards as a result of the receipt of the upfront and milestone payments from Ortho Biotech. In addition, based on management's current expectations regarding future profitability, the company has released the valuation allowance previously established against its deferred tax assets and recorded a one-time benefit of $7.0 million. The company also recorded a provision for taxes of $504,000 related to its first quarter income. The effective tax rate for the current provision for the quarter was approximately 40%; the company anticipates a similar rate for the balance of the year.

Anika's cash and cash equivalents at March 31, 2004, totaled $34.5 million, reflecting the $20.0 million milestone payment from Ortho Biotech tied to U.S. Food and Drug Administration marketing approval for OrthoVisc in February 2004.

About Anika Therapeutics
Headquartered in Woburn, Mass., Anika Therapeutics, Inc. (www.anikatherapeutics.com) develops, manufactures and commercializes therapeutic products and devices intended to promote the repair, protection and healing of bone, cartilage and soft tissue. These products are based on hyaluronic acid (HA), a naturally occurring, biocompatible polymer found throughout the body's joints. In addition to ORTHOVISC®, Anika markets HYVISC® in the U.S. for the treatment of equine osteoarthritis through Boehringer Ingelheim Vetmedica, Inc. and manufactures AMVISC® and AMVISC® Plus, HA viscoelastic products for ophthalmic surgery, for Bausch & Lomb. It also produces STAARVISCTM-II for distribution by STAAR Surgical Company and ShellgelTM for Cytosol Ophthalmics, Inc.

Anika Therapeutics, Inc.
(781) 932-6616

Pondel Parsons & Wilkinson
Susan Klein, (508) 358-4315
Robert Whetstone, (310) 207-9300

The statements made in this press release which are not statements of historical fact are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements that may be identified by words such as "designed," "believe," "will," "expect," "look forward," "expand" and other expressions which are predictions of or indicate future events and trends and which do not constitute historical matters identify forward-looking statements, including without limitation statements regarding the Company's expectations and beliefs with respect to growth in Canadian sales of ORTHOVISC or the Canadian osteoarthritis market or Rivex's ability to market and distribute ORTHOVISC. These statements are based upon the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties. The Company's actual results could differ materially from any anticipated future results, performance or achievements described in the forward-looking statements as a result of a number of factors including the risk that (i) Rivex's aggressive marketing efforts do not result in meaningful sales in Canada, (ii) enactment of adverse government regulation, (iii) competitive pressures among hyaluronic acid viscoelastic products may increase significantly and have an effect on pricing, or (iv) the strength of the Canadian economy. Certain other factors that might cause the Company's actual results to differ materially from those in the forward-looking statements include those set forth under the headings "Business," "Risk Factors and Certain Factors Affecting Future Operating Results" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year ended December 31, 2001, as well as those described in the Company's other press releases and SEC filings.